US job growth slows to 29,000 in September as unemployment ticks up to 4.2%

September labor market slowdown

Employers in the United States added 29,000 jobs in September, falling short of economist expectations that ranged between 70,000 and 84,000. Data released by the Bureau of Labor Statistics also revised previous employment gains downward by a combined 60,000 positions for July and August. After accounting for those adjustments, the labor market contracted by 10,000 jobs in July and added 133,000 jobs in August. The national unemployment rate edged higher to 4.2%, even as the labor force participation rate expanded by 0.2 percentage points during the month. Industry breakdowns showed slight contractions in media segments, with broadcasting and content providers shedding 3,000 jobs to 328,100, while movies and music lost 200 jobs to 328,500.

Federal Reserve policy deliberations

The final employment report before the November 3 midterm elections lands following the Federal Reserve's decision last month to increase interest rates for the first time in three years. Central bank leadership has weighed softening employment gains against persistent inflation, particularly elevated energy costs tied to the US-Israel war on Iran.

Inflation is too high and has been for too long.

Despite that earlier move, New York Federal Reserve President John Williams stated this week that there was "no need for urgency" regarding another rate increase in October. Market expectations for an October policy hike subsequently fell below 50%, down from approximately 70% earlier in the week, as investors assessed the slower hiring trajectory.

Global bond yields and fiscal strain

The labor data arrives during broad volatility across international sovereign debt markets. The benchmark 10-year US Treasury yield touched a 24-year high of 5.34% on Thursday after rising more than 80 basis points during the third quarter. In Europe, France's 10-year borrowing costs neared 5%, reaching their highest mark since 2002 following an unpopular 2027 austerity budget, public worker strikes, and student protests. The spread between French and German 10-year government yields widened beyond 140 basis points, marking its widest gap since 2012. Central banks in other regions maintained tighter policy, with the Reserve Bank of Australia lifting its benchmark interest rate by 25 basis points to 4.60% on Tuesday.

Consumer costs and political pressure

Rising borrowing costs and high energy prices continue to weigh on household budgets across the United States. US mortgage rates climbed from 7.00% to 7.28% on Thursday, marking their highest level in three years and largest single-week increase since 2022. Elevated oil prices have imposed an estimated $936 in added costs per American household, with diesel prices hovering near record highs. US President Donald Trump has responded by urging Germany and France to draw down their emergency diesel reserves, maintaining the threat of a US diesel export ban if European inventories are not released ahead of the winter season.